Wednesday, August 31, 2011

On August 6th after S&P downgraded the U.S. debt rating from AAA to AA+ with a negative outlook, NIA prayed that Americans would not make the mistake of buying U.S. Treasuries as a safe haven. We normally don't pray about economic matters, but only God can save the U.S. economy today as well as investors who have been brainwashed into believing U.S. government dollar-denominated bonds are a safe place to store wealth. Unfortunately, only when hyperinflation arrives will the majority of American citizens realize that fiat U.S. dollars should be used as a medium of exchange only and not a place to store wealth.

Since NIA was launched two and a half years ago, the overwhelming majority of our economic predictions have come true, with many of our accurate predictions being unique only to us. Sometimes we are a bit early with our predictions, but they almost always eventually come true. One of our predictions that we have been wrong about in the short-term, but will be proven right about later this decade, is the collapse of the U.S. Treasury market.

We thought there was a chance that many Americans would once again make the mistake of buying U.S. Treasuries during the recent sell-off of global financial markets, but we were shocked to see the yields of some U.S. Treasuries such as the 10-year bond, decline to new record lows. The yields of many government bonds have fallen through their lows of late-2008, but unlike the liquidity crisis of late-2008 when gold prices declined to a low of $720 per ounce, gold futures on August 22nd reached a new all time nominal high of $1,899.40 per ounce.

NIA likes gold as a bet against the U.S. Treasury market, which we believe is the largest bubble in world history. Any investor buying 10-year Treasuries with a yield of only 2.20% needs to have their head examined. Based on official Bureau of Labor Statistics (BLS) data, year-over-year price inflation in the U.S. is already 3.63%. NIA estimates the real rate of price inflation to currently be approximately 8% and we project real price inflation to reach double-digits next year. NIA finds it very unlikely that the U.S. will be able to survive the next ten years without hyperinflation.

Take a look at the long-term chart of 10-year yields below. After the inflationary crisis of the 1970s, 10-year yields surged to a high in the early-1980s of 14.5%. After inflation began to decline in the mid-1980s, the 10-year yield bottomed at 7% before rising again to 9%. In the 1990s, the 10-year yield averaged around 6.5%.

With the help of NIA's critically acclaimed economic documentaries including 'Meltup', 'The Dollar Bubble', and 'Hyperinflation Nation' that have been seen by millions of people, a larger percentage of the investment community is educated than ever before about the currency crisis that is ahead. We estimate that about 1/10 of our country now finally understands that as long as we are running massive budget deficits with our government making no real attempt to cut spending in a meaningful way, gold will keep increasing in nominal value and the U.S. dollar will continue losing its purchasing power. However, 9/10 of our nation still doesn't understand why they should own gold and would chase after $1,000 in cash being blown by the wind before picking up a 1 oz gold coin lying below them on the ground.

Investors today are buying and selling assets based on what they perceive to be risk assets and safe haven assets. Market volatility is now at a level last seen in March of 2009 towards the end of the last financial crisis. On days with either positive economic news or rumors that Bernanke is getting ready to unleash QE3, stock prices rise while the prices of both gold and U.S. Treasuries fall. On days with either negative economic news or rumors that Bernanke is unlikely to unleash QE3, stock prices fall while both gold and U.S. Treasury prices rise. Investors are buying both gold and U.S. Treasuries as a safe haven. Those buying U.S. Treasuries as a safe haven are doing so based on the market's actions in late-2008 when Treasuries rallied with the stock market collapsing. They fail to realize that every financial crisis is different and the next crisis will be nothing like 2008.

In 2008, we had a crisis due to a lack of liquidity. Today, the world is flooded with liquidity, but most people don't realize it yet because trillions of dollars are being hoarded on the sidelines and not chasing goods and services. Nobody knew for sure in 2008 how the Federal Reserve would react to the liquidity crisis. If the Federal Reserve did the right thing and allowed banks to fail we would have experienced many years of deflation. The Federal Reserve has made it clear that they will print enough money to bailout all major banks or other companies deemed "too big to fail". We are in a situation where the worse the economy gets, the more money the Fed will print and the higher prices of all assets will rise.

NIA predicts right now that over the next 16 months between now and the end of calendar year 2012, we will see the largest short-term increase in 10-year bond yields on a percentage basis in history. With CPI growth increasing for eight straight months and even the Fed's misleading core-CPI growth up 290% since October on a year-over-year basis, investors will soon realize that it is far too risky to own bonds that are paying such low yields.

President Obama yesterday nominated Alan Kreuger to lead his Council of Economic Advisers. We laughed when he heard Obama tell Kreuger that it will be tough for him to fill the shoes of Austan Goolsbee, who recently left his post to resume teaching at the University of Chicago. Whether it be Kreuger, Goolsbee, or Christina Romer (who preceded Goolsbee), they are all Keynesians who believe that more government spending and intervention is the key to bringing down unemployment and having a healthy economy.

Krueger worked in the White House during the first two years of the Obama administration as assistant Treasury secretary for economic policy. Krueger received his Ph.D. in economics from Harvard University and has worked at Princeton University since 1987, where his mail frequently gets mixed up with fellow Keynesian and New York Times op-ed columnist Paul Krugman. Krueger is the author of a book that was written solely to convince readers that having a high minimum wage doesn't cause unemployment. It should be common sense to all NIA members that if the government raised the minimum wage to $50 per hour, unemployment would rise dramatically as most jobs paying wages below $50 per hour would be destroyed. The truth is, eliminating the U.S. minimum wage would create thousands of new entry-level jobs in America and help lower the unemployment rate. Krueger was also instrumental in developing the "cash-for-clunkers" program, which NIA has written about on many occasions as being a monumental disaster for the U.S. economy.

It is absurd how the mainstream media calls Ron Paul an extremist for wanting to eliminate government intervention in our financial markets, reduce government spending, balance the budget, stop the Fed from printing money, and return to sound money. In NIA's opinion, Krueger is the real extremist. If there was no minimum wage and there never was "cash-for-clunkers", many unemployed 17 year old kids who are home on Facebook, could instead be out earning enough money to buy their own used car. The youth unemployment rate is currently double the overall unemployment rate and used car prices are up 20% during the past year, because of the policies supported by Krueger.

The U.S. government used "cash-for-clunkers" to buy phony GDP growth in 2009, stealing from future automobile sales. After the "cash-for-clunkers" program ended, General Motors reported that their sales in August of 2010 declined 25% from sales in August of 2009. NIA predicted on September 1, 2010, that this would lead to a sharp contraction in GDP growth and cause the Fed to unleash the mother of all quantitative easing. Two months later on November 3, 2010, the Fed announced $600 billion in additional quantitative easing.

GDP growth in the 4Q of 2010 declined to 3.14% on a year-over-year basis, down from 3.51% in the 3Q of 2010. GDP growth has continued to decline lower this year to 2.24% in the first quarter and 1.55% in the second quarter (which was just revised downward from an initial estimate of 1.62%). The BLS used a price deflator of only 2.5% in the 2Q. In our opinion, real GDP in the U.S. today is already in negative territory. With it becoming increasingly likely that official year-over-year GDP changes will become negative by the end of calendar year 2011, it is only a matter of time before the Federal Reserve unleashes QE3 in disguise under a new name.

With the Federal Reserve no longer reporting the M3 money supply, the broadest measure of money supply currently reported by the Fed is M2. During the past few weeks, the U.S. has been seeing a very alarming rise in M2. The M2 money supply has risen $228.5 billion over the past four weeks to $9.5218 trillion. On an annualized basis, this equals a 32% increase in M2. Much of this gain can be attributed to people moving funds from institutional money funds and large time deposits into checking and savings accounts. Investors are nervous about the state of our economy and as soon as the investment community begins to realize that the next economic crisis will be a currency crisis, not a liquidity crisis, we will see the world lose confidence in the U.S. dollar and rush out of U.S. Treasuries and into gold, silver, and other real assets.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

Tuesday, August 30, 2011

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Something big is going on in the United States in a sentiment change, an altered state of psychology, a growing sense of panic. My opinion is that the nation has entered the early stage of comprehension among the population of systemic failure. The most immediate measures are the rash of heavy selling down days in the US Stock market, the strong purchases in Gold, as well as the reactions to constant news of sovereign debt in trouble, and the big banks teetering. Several other softer measures have been noted, made overwhelming by their sheer numbers. A perception wave has taken hold of a toxic USEconomy, a toxic US financial sector, a toxic US housing sector, a toxic economic brain trust in the US towers. A sense of doom is creeping into the nation's living rooms and board rooms, that the nation is in deterioration. Worse, they are realizing how US Federal Reserve is toothless, unable to address or treat the problems. The citizenry is not adept or gifted enough to conclude that the problem is national insolvency, whose errant prescription has been a flood of liquidity. But they sense something is horribly wrong, and worse, that no current treatment will fix anything. They detect the backfire of the blunt banker solution and the misfired futility of the federal government solution. Witness the rooted perception and horrifying awareness that the United States is moving gradually and unavoidably into a systemic failure. The perception is that neither governments nor bankers have any solutions to help the people, who must impose their own gold standard. The Gold price registered a new high over $1900 per ounce, this after mental midget clowns and propaganda wags in May pronounced the bull market as finished. Their opinions are worthless. Watch them vanish behind the tall shrubbery when Gold surpasses $2000 this autumn.

ROOT OF NATIONAL ILLNESS

In my view, the national illness is a toxic USEconomy dominated by pervasive profound grotesque insolvency. In the early part of the 2000 decade, a strong hint of near-term future failure was obvious. The USEconomy shed its industry to Asia since the 1980 decade. In the early years of last decade, the migration of factories was to China. In its place, the US consumers relied upon home equity withdrawal, blessed as good by the American economists and high priest of heretical ideology Alan Greenspasm. The hint to sound money economists such as the Jackass from the dependence shift was a clear signal of ruin in a few years, as in now. It came on time. In my view, the national illness is a toxic US financial sector dominated by pervasive insolvency and massive fraud. The FASB accounting rule change permitted grotesque falsification of the bank balance sheets, reflected in market capitalizations above zero. The value zero has been and still is more accurate, still is the price target. The big US banks continue to fight off the powerful forces of a housing market in resumed chronic decline, sovereign bonds overseas beset by heavy losses, and a spate of bond investor lawsuits that rack up. All attempts to limit lawsuit exposure have failed. Litigants line up in court like Wal-Mart shoppers on a big sale. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.

The Achilles Heel, the broken leg, the ruined road, and the toxic field is HOUSING & MORTGAGES. The contaminated blood, the leaking gangrene into the circulation system, the sewer line in the water supply is BANKING & FINANCE. The USEconomy grew dependent upon the two-sided asset bubble. No resolution or remedy or liquidation means rotting flesh and gangrene on the body economic. Americans have noticed. The US banking system remains insolvent, worse each quarter from toxic assets. Home prices have resumed their decline, despite all incorrect announcements by banking, political, and economic leaders over public address propaganda loudspeakers. The crowd control devices are not working, as the people are deeply worried. The banks are plagued by an REO inventory bloat extended from home foreclosures, where they do not dare release all the homes onto the already bloated market for sale. The banks are peppered in attacks by bond investor lawsuits, which work to resolve the bond fraud from misrepresentation of mortgages packaged in AAA toxic bundles. They lost 30% to 60% in a matter of months and a few years. The banks have a dirty secret of hundreds of thousands of home loans operating in strategic default, whether the homeowners refuse to pay anything more on their mortgages, often demanding to see the proper title on the property. The news media will not cover this story. In every court challenge, the banks have lost the cases, resulting in the homeowners taking clear title with the loan fully forgiven. The newest threat to the banks is the next Option ARM wave, the second round of adjustable rate mortgage that will continue in a storm until 2013 ends. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.

No meaningful home loan balance scheme conducted by the USGovt means the housing mass & mortgage connective tissue circle the toilet in a flush. The reason is simple. Home loan balance reductions would expose gigantic bond fraud in tracing the mortgage bonds to home loans with title registrations. It would result in exposure of Fannie Mae counterfeit bonds having circulated widely. It would result in forced bank asset writedowns amidst the pervasive accounting fiction at work on the balance sheets, blessed as good by the FASB. It would expose MERS as a fraudulent device to hold titles without legal standing. It would embolden half the nation into civil disobedience, as in outright refusal to pay banks on home loans. It would expose the nation as insolvent generally. It might interfere with some perverse national plan to use Fannie Mae as some devious device to become landlord to one third of the nation's homes, a plan of collectivism that Karl Marx might approve. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.

PANHANDLE DOCTRINE & PARASITE DOCTRINE

The tragedy that struck the US nation has a great connection to toxic economic thought from its economic brain trust. It is thoroughly toxic, corrupted, and destructive ideology woven in an acidic blanket with rampant impairment to working capital. It earns a D grade on economics effectiveness, and in fairness is not what Keynes prescribed. It is toxic thinking. It seems to have elevated the Voodoo Economics of the 1980 decade to the Fascist Business Model in the 2000 decade. The license to engage in fraudulent activity is engrained in the pact between big business (led by big banks) and the USGovt policy making groups which are dominated by Wall Street firms (led by Goldman Sachs). The summary line is vividly clear to astute adept students of economics: the United States no longer has any concept of capitalism, and has undergone three decades of capital destruction. The crescendo of the capital destruction has taken place in the last three or four years, whose climax tune is the shrill Quantitative Easing. The cast of American economists is wedded deeply to the notion of credit dispensation and monetary growth under the illusion of control. They do not comprehend capital formation anymore, relying instead upon what the Jackass calls with bitter intended mockery the Panhandle Doctrine applied to consumers, matched by a Parasite Doctrine applied to banks. If you give a street bum money, he will buy coffee and maybe a sandwich. The USEconomy is based upon coffee and sandwiches, not much more, as the consumer is given money in pockets and purses to spend. The depravity of economic thought is shocking. The stock market & housing sector (FIRE) replaced industry & factories with tragic outcome. FIRE means finance, insurance, and real estate, a great ironic moniker since the fires burned capital at a rapid rate.

A prevailing belief exists among American economists that if the consumer picks up, then industry will expand with big capital spending and job hires. The belief is entirely backwards, a symptom of American economist ignorance and stupidity. The consumer (street bum) relies upon tax breaks, reduced Social Security & Medicare contributions, extended jobless benefits, clunker car gifts, first time home buyer tax credits, and more. They are all examples of the Panhandle Doctrine from which the USEconomy have grown dependent upon. Observe the toxic American economist ideology. For banks, a parallel Parasite Doctrine hard at work has gutted the financial sector. The regular fare offered as examples as strategic crutches to a broken sector are sponsored USTreasury carry trade (aided steered by Interest Rate Swaps), betting on their own stocks lifted by phony FASB accounting rules, participation in USFed frequent flyer programs like the Money Market giveaways, flash stock trading (High Frequency Games) done with impunity, short stock sale bans (Goldman Sachs given an exemption), and naked selling of USTBonds (grandaddy fraud). See failures to deliver, buttressed by Interest Rate Swap artificial end demand that serves to cover the other end and qualify as a bonafide bucket shop.

Thanks to Aaron Krowne and his Mortgage Implode website, for the intrepid work on the mortgage market and recently on the USTreasury market. He provided the graph on Failures to Deliver on USTBonds. See the ML Implode article. The total is roughly $1 trillion in bond fraud, an ongoing figure. The story broke in mid-2009, only to disappear with organized suppression. The Wall Street firms lost their investment banking business, but found a fertile source of liquidity from naked short sales of USTBonds, whose buyers were the artificial factory of Interest Rate Swaps. Without this naked shorting line of liquidity, the Wall Street job cuts would have been much worse, equal to the London and European bank sector job cuts. The Parasite Doctrine has a poster boy project with these fraudulent sales given cover by the Securities & Exchange Commission, whose official ranks are filled by Wall Street henchmen.

THE CONFIDENCE GAME RUSE

The American public is told that confidence is the root cause of the absent woefully low business spending. The confidence took on damage after the vacant USGovt & USCongress budget deal and debt extension to be sure. But the true source of absent business capital investment is broad deep insolvency, the poor business risk, extending from the broken housing market, the wrecked banking sector, and the inadequate industrial base. The government finance requirements serve to crowd out the bond market, which in a normal system would rely upon the financial sector for capital formation, business development, and construction of platforms that offer job growth. In the US financial sector, the innovation is with carry trade speculation, exploitation of easy money facilities, and profound bond fraud, hardly the stuff of growth mechanisms. Big banks do not lend when they can reliably make money on the USTreasury Bond carry trade. The American corporate sector has responded to the liquidity flood, aka monetary hyper-inflation, and the corresponding acidic undermine to capital, by moving investment overseas. See Cisco, General Electric, and Hewlett Packard, which is instead raising a white flag to Asian PC makers. The most glaring consequence to the monetary policy, marred (not aided) by QE and QE-Lite and QE2 and Secret Global QE, has been the entire cost structure has risen, without benefit of rising incomes.

Furthermore check Economics 201, Chairman Bernanke. Low interest rates suppress the USEconomy, not stimulate it. Almost twice as much interest income is earned versus interest costs paid. The pensioners and retirees are struggling with inadequate income, spending less. The bond investors sought out higher yields in mortgage bonds, only to be burned by 25% to 40% losses in principal. Pension fund income is way down. Of course the motive has been to support and stimulate speculation in Wall Street, where the USFed primary loyalty lies, surely not with Main Street and business interests.

FEAR SETS IN, PANIC BEGINS, RUIN PERCEIVED

A confluence of major perceptual factors is flowing in the national mindset. Fear is setting in. The early stage of panic is evident. A growing perception of ruin can be spotted. People are responding to numerous high profile stories, each of which is important in painting a mosaic of extremes, none of which would have occurred in the 1990 decade. The chorus of crisis is loud and shrill. Here are some important events that the American public must examine.

The broken USGovt budget and upcoming huger deficits. With tax receipts trending down, and the need for economic stimulus programs clear, the USGovt deficit next year will be larger, not smaller, despite what the errant Govt Accountability Office statement reads.
The blatantly obvious USeconomic recession, whose billboard signs litter the highway, the latest being the Richmond Fed down 10% (called good), and the Philly Fed down 37 (could not be called anything but horrible). The Philly Fed forecast was minus 2 by the intrepid marketing prop carnival barker American economists.
The EUR 850 billion bailout by the Euro Central Bank, intended to cover the mountain of Italian and Spanish Govt bonds. But the bailout will accomplish nothing, just like Greece, where numerous bank bond bandaids have been applied. And besides, the Germans have refused to offer any more bailout funds, calling Italy and Spain too big to bail out, quite properly.
The creepy feeling of a global monetary system breakdown. The major currencies are being debased to such a grand extent that even the less gifted American public can notice. They see the onslaught of sovereign bonds overseas, and might harbor more distrust for USTreasury Bonds that the media reports. They might be buying gold & silver coins from the USMint, which cannot keep up with demand.
The anticipated QE3 heresy is certain to continue. It has already come in Global QE form, as the Jackass expected. My forecast is that the USFed will formally support the US Stock market and violate its charter. But the move will be applauded and serve as the next heroin injection to the body economic, with certain additional capital destruction and rising cost structure.
The Swiss and Japanese central bank futile actions, designed to halt their rising Franc and Yen currencies. The lesson learned is that all major central banks have turned toothless, their policies ineffective, wasteful, and destructive. The Competing Currency War is making all of them big losers. Their economies suffer.
The pitiful paltry puny USTreasury long-term yield of 2.0% to 2.2% does not offer the American saver the proper incentive to save, nor the proper return on investment, certainly not an adequate yield to reflect the risk taken. The yield now stands at 7% to 8% below the true CPI rate.

SINKING INTO THE AMERICAN PEOPLE MINDSET IS THAT THIS IS 2008 ALL OVER AGAIN, BUT TWICE AS BAD, SINCE THE SOLUTION HAS FAILED AND TRUE REMEDY IS SEEN AS IMPOSSIBLE!! The USGovt and USFed and Wall Street policy makers and league of Rasputins have thrown $3 trillion at the problem, have bailed out the big US banks, have conducted numerous liquidity programs, have made Swap Lines to Europe, have completed a few mickey mouse stimulus initiatives (clunker cars, first time home buyers), have extended but terminated aid to states, have extended jobless benefits, have given SS/Medicare relief, have operated gigantic debt monetization programs (QE's), but the USEconomy is rolling over into a recession anyway. The confirmation of the recession is the many denials with shorter frequency between denials

THE SHAPE OF QE3

As the Jackson Hole Conference is set to begin in the spectacular picturesque mountains of Wyoming, anticipation and anxiety rise. The Grand Tetons serve as a fitting location to announce the renewed dependence from the USFed teats, the monetary spigot. Where the spigot is directed remains the main question in debate. Given the robust supposed USTreasury Bond rally, it hardly seems suitable to direct QE3 toward more USTBond buying, unless they wish to avoid USTreasury auction failures. The ultra-low yield combined with ultra-high supply makes for extremely high risk. Bond investors might not show up at all. A failed auction would be highly embarrassing as a event after the highly publicized bond rally, an irony worthy of Rolling Stone exposure or a Saturday Night Live comedy segment. The USGovt minions and Wall Street made men had crowed that the bond rally contradicted the Standard & Poors downgrade for the USGovt debt. My forecast is that the QE3, when it comes, will be designed and intended openly to support the Stock market. It will not arrive this week. It will arrive with full bore announcement in response to the next round of deep US stock market declines. History will be made. The spin on the USTBond rally to 2% on the 10-yr is deafening and deceptive. We are told the bond market anticipates QE3 but that is patently false. The bond market smells with great dread the next USEconomic recession, or more accurately, recognition of the ongoing chronic powerful recession that began in 2008 and never ended. The bond market smells unfixable recession, all current tools having failed. The bond market detects correctly that the US Stock market from mid-2010 has been propped by QE initiatives, now absent.

The irony, intrigue, and corruption is both bizarre and macabre. The Standard & Poors President Deven Sharma has decided to step down only three weeks after the agency downgraded the US credit rating. What a predictable move. The post will be occupied by Douglas Peterson, chief operating officer of Citibank, to take effect on September 12th. Business as usual on Wall Street. The S&P lead role will be in capable hands. One might wonder if the outgoing officer will be charged with child pornography or a rape in a hotel. That event might not be needed.

GOLD MAKES RECORD HIGHS

This week has been tumultuous. The best summary in my view is to conclude that the Gold price set a record high, and fully revealed what direction it will take this autumn. In the low volume vacation dominated days of summer, an opportunity to engineer a selloff has begun in earnest. Gold has gone down to $1765 and Silver to $40 flat, still way up on the year. Hats off to Ben Davies, who has been impressively accurate in his precious metals forecasts. He nailed the silver forecast in April, expecting a steep pullback to $35. We saw it!! In June, when Gold was trading in the low $1500 level, Davies boldly forecasted that Gold would break above $2000 by yearend 2011. The strong upward moves seen so far in August have captured global attention. After action last week, Davies fine tuned his 2011 gold call, stating he expects Gold to reach $2100 by the end of December after first a correction to $1675. Today we saw it!! The hefty pullback will lose some faithful followers, but offer savvy investors a great chance to add to their positions. The cartel is busy making countless grateful Chinese, Indians, and Asians who have not stopped buying precious metals in defense of rapid inflation. They see the American bankers as the inflation villains. The sudden pullback has assured the last fire sale before the autumn gold bull romp, a great trampling event to come. It is written, it will happen. See the King World News interview.

The compromised clowns have been busy citing how the Gold price is $150 to $200 too high based upon price inflation, or even 50% over-valued based on some cockeyed Fed Business Model. They overlook the broken distorted market is the USTBonds, supported by powerful usage of Interest Rate Swaps, aided by USFed monetization still and the migration from stocks to bonds. The volatile moves in the Gold market can be interpreted with high predictability. The big down move today signals even bigger upward moves in the next few months. The money is moving quickly today on Wednesday. The 10-yr USTreasury has rallied on the TNX from 2.14% to 2.21% as a decent move. The crude oil price is up from $85.40 to $86.1 as a modest move. Nobody can deny that panic has hit the stock market, as the recession can be seen without rose colored glasses. Expect much more debasement of the USDollar, as tax revenues fall and stimulus costs rise. The bigger USGovt deficits must be financed, during a truly hostile climate. The complete ruin of major global currencies is in progress, not stoppable. Money is being ruined to such an extent that people are bewildered, wondering what constitutes money if sovereign bonds are being attacked and losing value. The tainted USTreasury Bond market has become almost a source of great amusement. The entire major currency market is in turmoil. See the Swiss Franc, the Japanese Yen, and their rapid rise several standard deviations above their norms or trendlines. Havoc has taken root.

The Libyan chapter will be properly told in a year or two. Tyrant Qaddafi wanted to install a Gold Dinar for North African usage, a similar sin committed by Saddam Hussein. These guys never learn that a challenge to the USDollar is met with armed resistance. The US & UK forces entered the fray. The secondary goal might have been to take oil producing capacity offline, thus lifting the crude oil price. Big Oil interests do not want the global recession to rock the crude oil price too much. The other benefits have been the $50 billion in funds frozen solid in US & London banks. Another $50 billion is frozen in European banks. Expect it to remain out of reach by Libya's new leaders, despite talk. It is too badly needed within the Anglo banking system. See Oslo. The search is on not only for Qaddafi, who is surely comfortable somewhere in a desert bunker, but also well fed, and well medicated with his usual fare of psycho-tropic drugs. The hunt is also on for Libyan gold bullion. The Anglo bankers need it, since the COMEX and LBMA are just about bone dry, and the big US & UK banks are insolvent on the edge of failure. See their Credit Default Swap rates on debt insurance. For the greater good of the Anglo Empire, gold must be found and secured and locked up in the banking system, regardless of the propaganda messages put forth.

Prepare for $2100 gold by January, and $60 silver by January. The last open door is being made possible in the final days of August. Like last year, the months of September through January will be ones for the history books. The start of big bank failures in the United States, London, and Europe should add to the gold run. Contagion has hit Italy, Spain, and France (the newest PIGS lookalike). The breakdown will be broad, deep, and frightening in the next few months. The twisted thinking is probably that gold must be brought down as much as possible, to make a lower base before the next gigantic upward moves beyond the $2000 level and probably past $2100. The gold breakout will capture global attention and make major headline news. This is 2008 all over again, but much worse!! The story line will be that nothing was fixed, but that nothing can be fixed, and much more debasement of money will come. The Gold Meter will rise in direct reflection.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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The war in Libya is over. More precisely, governments and media have decided that the war is over, despite the fact that fighting continues. The unfulfilled expectation of this war has consistently been that Moammar Gadhafi would capitulate when faced with the forces arrayed against him, and that his own forces would abandon him as soon as they saw that the war was lost. What was being celebrated last week, with presidents, prime ministers and the media proclaiming the defeat of Gadhafi, will likely be true in due course. The fact that it is not yet true does not detract from the self-congratulations.

For example, Italian Foreign Minister Franco Frattini reported that only 5 percent of Libya is still under Gadhafi’s control. That seems like a trivial amount, save for this news from Italian newspaper La Stampa, which reported that “Tripoli is being cleaned up” neighborhood by neighborhood, street by street and home by home. Meanwhile, bombs from above are pounding Sirte, where, according to the French, Gadhafi has managed to arrive, although it is not known how. The strategically important town of Bali Walid — another possible hiding place and one of only two remaining exit routes to another Gadhafi stronghold in Sabha — is being encircled.

To put it differently, Gadhafi’s forces still retain military control of substantial areas. There is house-to-house fighting going on in Tripoli. There are multiple strongholds with sufficient defensive strength that forces cannot enter them without significant military preparation. Although Gadhafi’s actual location is unknown, his capture is the object of substantial military preparations, including NATO airstrikes, around Bali Walid, Sirte and Sabha. When Saddam Hussein was captured, he was hiding in a hole in the ground, alone and without an army. Gadhafi is still fighting and posing challenges. The war is not over.

It could be argued that while Gadhafi retains a coherent military force and significant territory, he no longer governs Libya. That is certainly true and significant, but it will become more significant when his enemies do take control of the levers of power. It is unreasonable to expect that they should be in a position to do so a few days after entering Tripoli and while fighting continues. But it does raise a critical question: whether the rebels have sufficient coherence to form an effective government or whether new rounds of fighting among Libyans can be expected even after Gadhafi’s forces cease functioning. To put it simply, Gadhafi appears to be on his way to defeat but he is not there yet, and the ability of his enemies to govern Libya is doubtful.

Immaculate Intervention

Given that the dying is far from over, it is interesting to consider why Barack Obama, Nicolas Sarkozy and David Cameron, the major players in this war, all declared last week that Gadhafi had fallen, implying an end to war, and why the media proclaimed the war’s end. To understand this, it is important to understand how surprising the course of the war was to these leaders. From the beginning, there was an expectation that NATO intervention, first with a no-fly zone, then with direct airstrikes on Gadhafi’s position, would lead to a rapid collapse of his government and its replacement with a democratic coalition in the east.

Two forces combined to lead to this conclusion. The first consisted of human-rights groups outside governments and factions in foreign ministries and the State Department who felt an intervention was necessary to stop the pending slaughter in Benghazi. This faction had a serious problem. The most effective way to quickly end a brutal regime was military intervention. However, having condemned the American invasion of Iraq, which was designed, at least in part, to get rid of a brutal regime, this faction found it difficult to justify rapid military intervention on the ground in Libya. Moral arguments require a degree of consistency.

In Europe, the doctrine of “soft power” has become a central doctrine. In the case of Libya, finding a path to soft power was difficult. Sanctions and lectures would probably not stop Gadhafi, but military action ran counter to soft power. What emerged was a doctrine of soft military power. Instituting a no-fly zone was a way to engage in military action without actually hurting anyone, except those Libyan pilots who took off. It satisfied the need to distinguish Libya from Iraq by not invading and occupying Libya but still putting crushing pressure on Gadhafi.

Of course, a no-fly zone proved ineffective and irrelevant, and the French began bombing Gadhafi’s forces the same day. Libyans on the ground were dying, but not British, French or American soldiers. While the no-fly zone was officially announced, this segue to an air campaign sort of emerged over time without a clear decision point. For human-rights activists, this kept them from addressing the concern that airstrikes always cause unintended deaths because they are never as accurate as one might like. For the governments, it allowed them to be seen as embarking upon what I have called an “immaculate intervention.”

The second force that liked this strategy was the various air forces involved. There is no question of the importance of air power in modern war, but there is a constant argument over whether the application of air power by itself can achieve desired political ends without the commitment of ground forces. For the air community, Libya was going to be the place where it could demonstrate its effectiveness in achieving such ends.

So the human-rights advocates could focus on the ends — protecting Libyan civilians in Benghazi — and pretend that they had not just advocated the commencement of a war that would itself leave many people dead. Political leaders could feel that they were not getting into a quagmire but simply undertaking a clean intervention. The air forces could demonstrate their utility in delivering desired political outcomes.

Why and How

The question of the underlying reason for the war should be addressed because stories are circulating that oil companies are competing for vast sums of money in Libya. These stories are all reasonable, in the sense that the real story remains difficult to fathom, and I sympathize with those who are trying to find a deep conspiracy to explain all of this. I would like to find one, too. The problem is that going to war for oil in Libya was unnecessary. Gadhafi loved selling oil, and if the governments involved told him quietly that they were going to blow him up if he didn’t make different arrangements on who got the oil revenues and what royalties he got to keep, Gadhafi would have made those arrangements. He was as cynical as they come, and he understood the subtle idea that shifting oil partners and giving up a lot of revenue was better than being blown up.

Indeed, there is no theory out there that explains this war by way of oil, simply because it was not necessary to actually to go war to get whatever concessions were wanted. So the story — protecting people in Benghazi from slaughter — is the only rational explanation for what followed, however hard it is to believe.

It must also be understood that given the nature of modern air warfare, NATO forces in small numbers had to be inserted on the ground from the beginning — actually, at least a few days before the beginning of the air campaign. Accurately identifying targets and taking them out with sufficient precision involves highly skilled special-operations teams guiding munitions to those targets. The fact that there have been relatively few friendly-fire accidents indicates that standard operational procedures have been in place.

These teams were probably joined by other special operators who trained — and in most cases informally led — indigenous forces in battle. There were ample reports in the early days of the war that special operations teams were on the ground conducting weapons training and organizing the fighters who opposed Gadhafi.

But there proved to be two problems with this approach. First, Gadhafi did not fold his tent and capitulate. He seemed singularly unimpressed by the force he was facing. Second, his troops turned out to be highly motivated and capable, at least compared to their opponents. Proof of this can be found in the fact that they did not surrender en masse, they did maintain a sufficient degree of unit coherence and — the final proof — they held out for six months and are still holding out. The view of human-rights groups that an isolated tyrant would break in the face of the international community, the view of political leaders that an isolated tyrant facing the might of NATO’s air forces would collapse in days and the view of the air forces that air strikes would shatter resistance, all turned out to be false.

A War Prolonged

Part of this was due to a misunderstanding of the nature of Libyan politics. Gadhafi was a tyrant, but he was not completely isolated. He had enemies but he also had many supporters who benefitted from him or at least believed in his doctrines. There was also a general belief among ordinary government soldiers (some of whom are mercenaries from the south) that capitulation would lead to their slaughter, and the belief among government leaders that surrender meant trials in The Hague and terms in prison. The belief of the human-rights community in an International Criminal Court (ICC) trying Gadhafi and the men around him gives them no room for retreat, and men without room for retreat fight hard and to the end. There was no way to negotiate capitulation unless the U.N. Security Council itself publicly approved the deal. The winks and nods that got dictators to leave in the old days aren’t enough anymore. All countries that are party to the Rome Statute are required to turn a leader like Gadhafi over to the ICC for trial.

Therefore, unless the U.N. Security Council publicly strikes a deal with Gadhafi, which would be opposed by the human-rights community and would become ugly, Gadhafi will not give up — and neither will his troops. There were reports last week that some government soldiers had been executed. True or not, fair or not, that would not be a great motivator for surrender.

The war began with the public mission of protecting the people of Benghazi. This quickly morphed into a war to unseat Gadhafi. The problem was that between the ideological and the military aims, the forces dedicated to the war were insufficient to execute the mission. We do not know how many people were killed in the fighting in the past six months, but pursuing the war using soft military power in this way certainly prolonged the war and likely caused many deaths, both military and civilian.

After six months, NATO got tired, and we wound up with the assault on Tripoli. The assault appears to have consisted of three parts. The first was the insertion of NATO special operations troops (in the low hundreds, not thousands) who, guided by intelligence operatives in Tripoli, attacked and destabilized the government forces in the city. The second part was an information operation in which NATO made it appear that the battle was over. The bizarre incident in which Gadhafi’s son, Seif al-Islam, announced as being captured only to show up in an SUV looking very un-captured, was part of this game. NATO wanted it to appear that the leadership had been reduced and Gadhafi’s forces broken to convince those same forces to capitulate. Seif al-Islam’s appearance was designed to signal his troops that the war was still on.

Following the special operations strikes and the information operations, western rebels entered the city to great fanfare, including celebratory gunfire into the air. The world’s media chronicled the end of the war as the special operations teams melted away and the victorious rebels took the bows. It had taken six months, but it was over.

And then it became obvious that it wasn’t over. Five percent of Libya — an interesting calculation — was not liberated. Street fighting in Tripoli continued. Areas of the country were still under Gadhafi’s control. And Gadhafi himself was not where his enemies wanted him to be. The war went on.

A number of lessons emerge from all this. First, it is important to remember that Libya in itself may not be important to the world, but it matters to Libyans a great deal. Second, do not assume that tyrants lack support. Gadhafi didn’t govern Libya for 42 years without support. Third, do not assume that the amount of force you are prepared to provide is the amount of force needed. Fourth, eliminating the option of a negotiated end to the war by the means of international courts may be morally satisfying, but it causes wars to go on and casualties to mount. It is important to decide what is more important — to alleviate the suffering of people or to punish the guilty. Sometimes it is one or the other. Fifth, and most important, do not kid the world about wars being over. After George W. Bush flew onto an aircraft carrier that was emblazoned with a “mission accomplished” banner, the Iraq war became even more violent, and the damage to him was massive. Information operations may be useful in persuading opposing troops to surrender, but political credibility bleeds away when the war is declared over and the fighting goes on.

Gadhafi will likely fall in the end. NATO is more powerful than he is, and enough force will be brought to bear to bring him down. The question, of course, is whether there was another way to accomplish that with less cost and more yield. Leaving aside the war-for-oil theory, if the goal was to protect Benghazi and bring down Gadhafi, greater force or a negotiated exit with guarantees against trials in The Hague would likely have worked faster with less loss of life than the application of soft military power.

As the world contemplates the situation in Syria, this should be borne in mind.

Monday, August 29, 2011

URL of this article: www.globalresearch.ca/index.php?context=va&aid=22364

Global Research, December 11, 2010

The tragic attacks of September 11, 2001 have resulted in almost ten years of perpetual war. September 11, 2001 was the first drum beats, or the opening salvos, of a much wider conflict. The deployment of U.S. and NATO troops in Afghanistan has secured a bridgehead into the Eurasian Heartland, which is geographically positioned on or near the borders of Iran, China, India, Pakistan, Russia, and the former Soviet republics of Central Asia.

Was Afghanistan the starting battle of a global war? The invasion of Afghanistan can be compared to the landing of the Western Allies, specifically the Americans, in North Africa as a bridgehead into Italy and Europe. At the same time NATO has been pushing from Europe towards the Eurasian Heartland, like the landing of the invading forces of the Western Allies in France.

Was September 11th, 2001 the start of the Third World War?

Historically speaking, it should be noted that distinctions between times of war and peace are not always clear-cut and conflicts do not always correspond to the dates set and standardized by historians. War was not even declared in the cases of many past conflicts, such as in the early 1700s when Augustus II of Saxony-Poland invaded Livonia or when Frederick IV of Denmark invaded Holstein-Gottorp. Also, in the cases of many conflicts, attempts were always made to cloak or hide the nature of the conflict as being a war or an act of aggression. The Romans and other imperial powers regularly engaged in this type of conduct.

Examples in history are the abstract chronological dates customarily used by historians to note important points in the Second World War and the start of the Cold War. In Western Europe and North America, the starting date for World War II is considered to be September 1, 1939, when Germany invaded Poland. For the former Czechoslovakia, March 16, 1939 (the date Germany invaded Czechoslovakia) was the starting date for the Second World War. In Russia and the former U.S.S.R. the start date of the Second World War is 1941, the date the Germans invaded the Soviet Union. Even the end date for World War II in Europe is different, because Germany officially surrendered to the Western Allies (namely the U.S., Britain, and France) on May 8, 1945 and to the Soviet Union on May 9, 1945.

The above dates are all set from an ethnocentric European perspective, which leaves out Asia. The history of World War II starts much earlier in Asia. Many consider the start of the Second World War to have been when Japan invaded China in the Second Sino-Japanese War in 1937, two years before 1939. Even before 1937, since 1931 the Chinese and Japanese were in conflict and 1931 too can be seen as the start of World War II.

The various dates and events for the start of the Cold War also vary, because of the identification of various events as the Cold War’s opening salvo(s). The 1945 American-Soviet tensions over the occupation of the Korean Peninsula, the Azerbaijan Crisis (1947-1948) arising from the Soviet occupation of Iranian provinces, the near wins for the Communists in national elections held in France and Italy (1947-1948), the struggle for power between the Communists and the non-Communists in Czechoslovakia (1947-1948), and the West Berlin Blockade (1948-1949) are also viewed as starting dates for the Cold War. Even events taking place during the Second World War, such as the Yalta Conference, the Tehran Conference, and the dropping of the atom bomb on the Japanese in Hiroshima and Nagasaki by President Harry Truman as a threat to the Soviets (about U.S. supremacy in the post-war order) are considered as the starting dates of the Cold War.

This question about dates also gives rise to another point in historiography. The nature of history is seamless and not the arbitrary one unintentionally made out by historians and history textbooks. One set of events leads to another. Just as how the First World War led to the Second World War and the Second World War led to the Cold War, the Cold War has led to the “Global War on Terrorism.”

The point is that in retrospect, historical dates and events are defined by people in the future and that sometimes people need to stand back to see the bigger picture.

The NATO and Anglo-American invasions of Afghanistan and Iraq are clearly tied to September 11, 2001. These events are also related to the military threats directed against Iran and Syria, the tensions in Lebanon and East Africa, as well as U.S. and NATO threats directed against China and Russia. In this regard, the historians of the future may say that World War III could have started on September 11, 2001 or that the tragic events on September 11, 2001 were a prelude to World War III.

Revelations from the U.S. Media on the Dawn of the 2006 Israel-Lebanon War: Are We in a World War?

As a note on the subject of whether World War III is currently being waged, the U.S. media watchdog Media Matters for America made a note that much of the mainstream media was touting that the U.S. was in the midst of a global war days after Israel began its war against Lebanon. Media Matters for America reported as follows on July 14, 2006:

Most recently, on the July 13 [2006] edition of Fox News’ The O’Reilly Factor, host Bill O’Reilly said “World War III ... I think we’re in it.” Similarly, on the July 13 [2006] edition of MSNBC’s Tucker, a graphic read: “On the verge of World War III?” As Media Matters for America has noted, CNN Headline News host Glenn Beck began his program on July 12 [2006] with a discussion with former CIA officer Robert Baer by saying “we’ve got World War III to fight,” while also warning of the “impeding apocalypse.” Beck and [former] officer Robert Baer had a similar discussion on July 13 [2006], in which Beck said: “I absolutely know that we need to prepare ourselves for World War III. It is here.” [1]

The mainstream media serves as a tool for the economic and political elite. It falls into line in propagating and supporting state domestic and foreign policy. In this sense the mainstream media is a vital component of a military-industrial-financial-media complex that helps shape the views of what the sociologist C. Wright Mills has termed a mass society.

It is clear that a World War III scenario was possible in 2006. The Israeli attack on Lebanon could have expanded into Syria. This would have seen Iranian intervention, which would have seen the U.S. and NATO entering the war to come to the aid of Tel Aviv as combatants. This could have resulted in a dangerous global war scenario arising from the Middle East, which will be examined later.

The dangers of a military intervention by the U.S. and NATO were very real. The Pentagon had planned to launch a NATO invasion of Lebanon, which would have included the deployment of U.S. Marines to fight the Lebanese Resistance. This has also been confirmed by Alain Pellegrini, the former military commander of the United Nations Interim Force in Lebanon (UNIFIL), in an interview with the newspaper As-Safir.

The Valleys and Mountains of Afghanistan: Just the Beginning of the “Long War”

The Weekly Standard, in the following month after September 11, 2001, ominously went on to outline the broader military campaign that was to come in an editorial by Robert Kagan and William Kristol published on October 29, 2001:

When all is said and done the conflict in Afghanistan will be to the war on terrorism what the North Africa campaign was to World War II: an essential beginning on the path to victory. But to what looms over the horizon — a wide-range war in locales from Central Asia to the Middle East and, unfortunately, back again to the United States — Afghanistan will prove but an opening battle. [2]

The Weekly Standard editorial, like a script, went on to clearly state that the multi-front war that was in the works would develop to become or resemble the “Clash of Civilizations” post-Cold War conflict model outlined by Samuel P. Huntington:

[T]his war will not end in Afghanistan. It is going to spread and engulf a number of countries in conflicts of varying intensity. It could well require the use of American military power in multiple places simultaneously. It is going to resemble the clash of civilizations that everyone has hoped to avoid. And it is going to put enormous and perhaps unbearable strain on parts of an international coalition that basks in contented consensus. [3]

In 2001, both Robert Kagan and William Kristol were well aware of the conflagration of war in Eurasia. Both men are U.S. political insiders that were aware of what direction U.S. foreign policy would take the U.S. military. After all Kagan and Kristol were associates with Dick Cheney, Donald Rumsfeld, and Paul Wolfowitz through the political think-tank the Project for a News American Century (PNAC) that outlined a global military roadmap for a “new American century.”

World War III in the Horizon?

Since the invasion of Taliban-controlled Afghanistan war has spread from Central Asia to the Middle East, Pakistan, the Caucasus, and East Africa. What is looming in the horizon? Is the “Global War on Terror” another name for the “Great Game?”

The “Great Game” for control of all Eurasia, from Eastern Europe and the Middle East to Central Asia, is underway. International tensions are building. In Eurasia and worldwide there is geo-political rivalry between a U.S. led military alliance and bloc and a Russian-Chinese-Iranian counter-alliance.

There are numerous fronts that can ignite a global war, but the Middle East has the highest risk. If Israeli attacks in 2006 threatened to lead to a global war, what would an attack on Iran lead to? An Israeli-U.S. attack against Iran and its allies could develop rapidly into a global war with the use of nuclear weapons.

Mahdi Darius Nazemroaya is a Research Associate at the Centre for Research on Globalization (CRG).

NOTES

[1] “Right-wing media divided: Is U.S. now in World War III, IV, or V?”, Media Maters for America, July 14, 2006: .
[2] Robert Kagan and William Kristol, “The Gathering Storm”, The Weekly Standard, October 29, 2001, p.13.
[3] Ibid.

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By Bill Wilson – Iceland is free. And it will remain so, so long as her people wish to remain autonomous of the foreign domination of her would-be masters — in this case, international bankers.

On April 9, the fiercely independent people of island-nation defeated a referendum that would have bailed out the UK and the Netherlands who had covered the deposits of British and Dutch investors who had lost funds in Icesave bank in 2008.

At the time of the bank’s failure, Iceland refused to cover the losses. But the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.

In response, the Icelandic people have told Europe to go pound sand. The final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent. “Taxpayers should not be responsible for paying the debts of a private institution,” said Sigriur Andersen, a spokeswoman for the Advice group that opposed the bailout.

A similar referendum in 2009 on the issue, although with harsher terms, found 93.2 percent of the Icelandic electorate rejecting a proposal to guarantee the deposits of foreign investors who had funds in the Icelandic bank. The referendum was invoked when President Olafur Ragnur Grimmson vetoed legislation the Althingi, Iceland’s parliament, had passed to pay back the British and Dutch.

Under the terms of the agreement, Iceland would have had to pay £2.35 billion to the UK, and €1.32 billion to the Netherlands by 2046 at a 3 percent interest rate. Its rejection for the second time by Iceland is a testament to its people, who feel they should bear no responsibility for the losses of foreigners endured in the financial crisis.

That opposition to bailouts led to Iceland’s decision to allow the bank to fail in 2008. Not that the taxpayers there could have afforded to. As noted by Bloomberg News, at the time the crisis hit in 2008, “the banks had debts equal to 10 times Iceland’s $12 billion GDP.”

“These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks,” Iceland President Olafur Grimsson told Bloomberg Television.

The voters’ rejection came despite threats to isolate Iceland from funding in international financial institutions. Iceland’s national debt has already been downgraded by credit rating agencies, and now those same agencies have promised to do so once again as punishment for defying the will of international bankers.

This is just the latest in the long drama since 2008 of global institutions refusing to take losses in the financial crisis. Threats of a global economic depression and claims of being “too big to fail” have equated to a loaded gun to the heads of representative governments in the U.S. and Europe. Iceland is of particular interest because it did not bail out its banks like Ireland did, or foreign ones like the U.S. did.

If that fervor catches on amongst taxpayers worldwide, as it has in Iceland and with the tea party movement in America, the banks would have something to fear; that is, the inability to draw from limitless amounts of funding from gullible government officials and central banks. It appears that the root cause is government guarantees, whether explicit or implicit, on risk-taking by the banks.

Ultimately, such guarantees are not necessary to maintain full employment or even prop up an economy with growth, they are simply designed to allow these international institutions to overleverage and increase their profit margins in good times — and to avoid catastrophic losses in bad times.

The lesson here is instructive across the pond, but it is a chilling one. If the U.S. — or any sovereign for that matter — attempts to restructure their debts, or to force private investors to take a haircut on their own foolish gambles, these international institutions have promised the equivalent of economic war in response. However, the alternative is for representative governments to sacrifice their independence to a cadre of faceless bankers who share no allegiance to any nation.

It is the conflict that has already defined the beginning of the 21st Century. The question is whether free peoples will choose to remain free, as Iceland has, or to submit.

Bill Wilson is the President of Americans for Limited Government. You can follow Bill on Twitter at @BillWilsonALG.

Read more at NetRightDaily.com: http://netrightdaily.com/2011/04/iceland-declares-independence-from-international-banks/#ixzz1WA4ohgQv

With the end of the Gadhafi regime seemingly in sight, it is an opportune time to step back and revisit one of the themes we discussed at the beginning of the crisis: What comes after the Gadhafi regime?

As the experiences of recent years in Iraq and Afghanistan have vividly illustrated, it is far easier to depose a regime than it is to govern a country. It has also proved to be very difficult to build a stable government from the remnants of a long-established dictatorial regime. History is replete with examples of coalition fronts that united to overthrow an oppressive regime but then splintered and fell into internal fighting once the regime they fought against was toppled. In some cases, the power struggle resulted in a civil war more brutal than the one that brought down the regime. In other cases, this factional strife resulted in anarchy that lasted for years as the iron fist that kept ethnic and sectarian tensions in check was suddenly removed, allowing those issues to re-emerge.

As Libya enters this critical juncture and the National Transitional Council (NTC) transitions from breaking things to building things and running a country, there will be important fault lines to watch in order to envision what Libya will become.

Divisions

One of the biggest problems that will confront the Libyan rebels as they make the transition from rebels to rulers are the country’s historic ethnic, tribal and regional splits. While the Libyan people are almost entirely Muslim and predominantly Arab, there are several divisions among them. These include ethnic differences in the form of Berbers in the Nafusa Mountains, Tuaregs in the southwestern desert region of Fezzan and Toubou in the Cyrenaican portion of the Sahara Desert. Among the Arabs who form the bulk of the Libyan population, there are also hundreds of different tribes and multiple dialects of spoken Arabic.

Perhaps most prominent of these fault lines is the one that exists between the ancient regions of Tripolitania and Cyrenaica. The Cyrenaica region has a long and rich history, dating back to the 7th century B.C. The region has seen many rulers, including Greeks, Romans, Arabs, Ottomans, Italians and the British. Cyrenaica has long been at odds with the rival province of Tripolitania, which was founded by the Phoenicians but later conquered by Greeks from Cyrenaica. This duality was highlighted by the fact that from the time of Libya’s independence through the reign of King Idris I (1951-1969), Libya effectively had two capitals. While Tripoli was the official capital in the west, Benghazi, King Idris’ power base, was the de facto capital in the east. It was only after the 1969 military coup that brought Col. Moammar Gadhafi to power that Tripoli was firmly established as the seat of power over all of Libya. Interestingly, the fighting on the eastern front in the Libyan civil war had been stalled for several months in the approximate area of the divide between Cyrenaica and Tripolitania.

Libya After Gadhafi: Transitioning from Rebellion to Rule
(click here to enlarge image)

After the 1969 coup, Gadhafi not only established Tripoli as the capital of Libya and subjugated Benghazi, he also used his authoritarian regime and the country’s oil revenues to control or co-opt Libya’s estimated 140 tribes, many members of which are also members of Libya’s minority Berber, Tuareg and Toubou ethnic groups.

It is no mistake that the Libyan revolution began in Cyrenaica, which has long bridled under Gadhafi’s control and has been the scene of several smaller and unsuccessful uprisings. The jihadist Libyan Islamic Fighting Group (LIFG) has also traditionally been based in eastern Cyrenaican cities such as Darnah and Benghazi, where anti-Gadhafi sentiment and economic hardship marked by high levels of unemployment provided a fertile recruiting ground. Many of these jihadists have joined the anti-Gadhafi rebels fighting on the eastern front.

But the rebels were by no means confined to Cyrenaica. Anti-Gadhafi rebels in Misurata waged a long and bloody fight against government forces to gain control of the city, and while the Cyrenaican rebels were bogged down in the Ajdabiya/Marsa el Brega area, Berber guerrillas based in the Nafusa Mountains applied steady pressure to the Libyan forces in the west and eventually marched on Tripoli with Arab rebels from coastal towns such as Zawiya, where earlier uprisings in February were brutally defeated by the regime prior to the NATO intervention.

These groups of armed rebels have fought independently on different fronts during the civil war and have had varying degrees of success. The different roles these groups have played and, more important, their perceptions of those roles will likely create friction when it comes time to allocate the spoils of the Libyan war and delineate the power structure that will control Libya going forward.

Fractured Alliances

While the NTC is an umbrella group comprising most of the groups that oppose Gadhafi, the bulk of the NTC leadership hails from Cyrenaica. In its present state, the NTC faces a difficult task in balancing all the demands and interests of the various factions that have combined their efforts to oust the Gadhafi regime. Many past revolutions have reached a precarious situation once the main unifying goal has been achieved: With the regime overthrown, the various factions involved in the revolution begin to pursue their own interests and objectives, which often run contrary to those of other factions.

A prime example of the fracturing of a rebel coalition occurred after the fall of the Najibullah regime in Afghanistan in 1992, when the various warlords involved in overthrowing the regime became locked in a struggle for power that plunged the country into a period of destructive anarchy. While much of Afghanistan was eventually conquered by the Taliban movement — seen by many terrorized civilians as the country’s salvation — the Taliban were still at war with the Northern Alliance when the United States invaded the country in October 2001.

A similar descent into anarchy followed the 1991 overthrow of Somali dictator Mohamed Said Barre. The fractious nature of Somali regional and clan interests combined with international meddling has made it impossible for any power to assert control over the country. Even the jihadist group al Shabaab has been wracked by Somali divisiveness.

But this dynamic does not happen only in countries with strong clan or tribal structures. It was also clearly demonstrated following the 1979 broad-based revolution in Nicaragua, when the Sandinista National Liberation Front turned on its former partners and seized power. Some of those former partners, such as revolutionary hero Eden Pastora, would go on to join the “contras” and fight a civil war against the Sandinistas that wracked Nicaragua until a 1988 cease-fire.

In most of these past cases, including Afghanistan, Somalia and Nicaragua, the internal fault lines were seized upon by outside powers, which then attempted to manipulate one of the factions in order to gain influence in the country. In Afghanistan, for example, warlords backed by Pakistan, Iran, Russia and India were all vying for control of the country. In Somalia, the Ethiopians, Eritreans and Kenyans have been heavily involved, and in Nicaragua, contra groups backed by the United States opposed the Cuban- and Soviet-backed Sandinistas.

Outside influence exploiting regional and tribal fault lines is also a potential danger in Libya. Egypt is a relatively powerful neighbor that has long tried to meddle in Libya and has long coveted its energy wealth. While Egypt is currently focused on its own internal issues as well as the Israel/Palestinian issue, its attention could very well return to Libya in the future. Italy, the United Kingdom and France also have a history of involvement in Libya. Its provinces were Italian colonies from 1911 until they were conquered by allied troops in the North African campaign in 1943. The British then controlled Tripolitania and Cyrenaica and the French controlled Fezzan province until Libyan independence in 1951. It is no accident that France and the United Kingdom led the calls for NATO intervention in Libya following the February uprising, and the Italians became very involved once they jumped on the bandwagon. It is believed that oil companies from these countries as well as the United States and Canada will be in a prime position to continue to work Libya’s oil fields. Qatar, Turkey and the United Arab Emirates also played important roles in supporting the rebels, and it is believed they will continue to have influence with the rebel leadership.

Following the discovery of oil in Libya in 1959, British, American and Italian oil companies were very involved in developing the Libyan oil industry. In response to this involvement, anti-Western sentiment emerged as a significant part of Gadhafi’s Nasserite ideology and rhetoric, and there has been near-constant friction between Gadhafi and the West. Due to this friction, Gadhafi has long enjoyed a close relationship with the Soviet Union and later Russia, which has supplied him with the bulk of his weaponry. It is believed that Russia, which seemed to place its bet on Gadhafi’s survival and has not recognized the NTC, will be among the big losers of influence in Libya once the rebels assume power. However, it must be remembered that the Russians are quite adept at human intelligence and they maintain varying degrees of contact with some of the former Gadhafi officials who have defected to the rebel side. Hence, the Russians cannot be completely dismissed.

China also has long been interested in the resources of Africa and North Africa, and Gadhafi has resisted what he considers Chinese economic imperialism in the region. That said, China has a lot of cash to throw around, and while it has no substantial stake in Libya’s oil fields, it reportedly has invested some $20 billion in Libya’s energy sector, and large Chinese engineering firms have been involved in construction and oil infrastructure projects in the country. China remains heavily dependent on foreign oil, most of which comes from the Middle East, so it has an interest in seeing the political stability in Libya that will allow the oil to flow. Chinese cash could also look very appealing to a rebel government seeking to rebuild — especially during a period of economic austerity in Europe and the United States, and the Chinese have already made inroads with the NTC by providing monetary aid to Benghazi.

The outside actors seeking to take advantage of Libya’s fault lines do not necessarily need to be nation-states. It is clear that jihadist groups such as the Libyan Islamic Fighting Group and al Qaeda in the Islamic Maghreb see the tumult in Libya as a huge opportunity. The iron fist that crushed Libyan jihadists for so long has been destroyed and the government that replaces the Gadhafi regime is likely to be weaker and less capable of stamping down the flames of jihadist ideology.

There are some who have posited that the Arab Spring has destroyed the ideology of jihadism, but that is far from the case. Even had the Arab Spring ushered in substantial change in the Arab World — and we believe it has resulted in far less change than many have ascribed to it — it is difficult to destroy an ideology overnight. Jihadism will continue to affect the world for years to come, even if it does begin to decline in popularity. Also, it is important to remember that the Arab Spring movement may limit the spread of jihadist ideology in situations where people believe they have more freedom and economic opportunity after the Arab Spring uprisings. But in places where people perceive their conditions have worsened, or where the Arab Spring brought little or no change to their conditions, their disillusionment could create a ripe recruitment opportunity for jihadists.

The jihadist ideology has indeed fallen on hard times in recent years, but there remain many hardcore, committed jihadists who will not easily abandon their beliefs. And it is interesting to note that a surprisingly large number of Libyans have long been in senior al Qaeda positions, and in places like Iraq, Libyans provided a disproportionate number of foreign fighters to jihadist groups.

It is unlikely that such individuals will abandon their beliefs, and these beliefs dictate that they will become disenchanted with the NTC leadership if it opts for anything short of a government based on a strict interpretation of Shariah. This jihadist element of the rebel coalition appears to have reared its head recently with the assassination of former NTC military head Abdel Fattah Younis in late July (though we have yet to see solid, confirmed reporting of the circumstances surrounding his death).

Between the seizure of former Gadhafi arms depots and the arms provided to the rebels by outside powers, Libya is awash with weapons. If the NTC fractures like past rebel coalitions, it could set the stage for a long and bloody civil war — and provide an excellent opportunity to jihadist elements. At present, however, it is too soon to forecast exactly what will happen once the rebels assume power. The key thing to watch for now is pressure along the fault lines where Libya’s future will likely be decided.

RSIS presents the following commentary ASEAN Response to Asian Food Security Concerns by Yang Razali Kassim. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg

No. 125/2011 dated 25 August 2011

ASEAN Response to Asian Food Security Concerns

By Yang Razali Kassim

Synopsis

As global food security rises to the top of the policymaking agenda, new approaches are being explored. Within ASEAN, Singapore’s position as a food importer is changing to become an active contributor to a more stable food security system.

Commentary

ASEAN HAS pushed food security to the top of its agenda amid continuing global concerns over the volatility of food prices and food supplies. Rising costs of staples like rice, wheat, grain and dairy products are causing nervousness because of their political and security impact. Vivid in the minds of ASEAN policymakers is the indirect role of food prices in provoking revolts in Tunisia and other Arab countries earlier this year, leading to the fall of governments in North Africa.

ASEAN economic ministers who met in Manado, Indonesia on 10-14 August 2011 noted the continuing risks of rising food and commodity prices. But they cautioned against curbing food trade and erecting protectionist measures to boost domestic reserves as these would only worsen global food insecurity. ASEAN re-emphasised the importance of its five-year strategic plan called the ASEAN Integrated Food Security Framework (AIFS). The AIFS aims to assure long-term food security in the region through enhanced cooperation among ASEAN countries.

This point was underscored by Dr Mohammad Maliki Osman, a Singapore government official, when opening the International Conference on Asian Food Security (ICAFS 2011) in Singapore on 10 August -- the same day the ASEAN meeting in Manado began.

In Search of Holistic Solutions

To be sure, food prices have improved somewhat since the global food crisis of 2007/2008, mainly because of larger reserves, according to United Nations’ Economic and Social Commission for Asia and the Pacific (ESCAP). Over the longer term, however, prices of staples are expected to remain volatile and food security therefore uncertain. The drivers for this uncertainty include climate change; increasing water and land scarcity; global population increase; growing demand for meat and dairy products; and the global financial crisis.

The growing concern for food security has galvanised the international community into greater cooperation. ICAFS 2011 itself ended with a move to forge a global consortium on food security comprising various stakeholders of the global food system. ICAFS was jointly organised by the Centre for Non-Traditional Security (NTS) Studies of Singapore’s S. Rajaratnam School of International Studies (RSIS) and the Philippine-based Southeast Asian Regional Centre for Graduate Study and Research in Agriculture (SEARCA).

The move towards stronger global collaboration, such as the RSIS-initiated global consortium, would help mitigate the full impact of another global food crisis. This could be pursued as part of the search for holistic solutions to solve food security issues. To begin with, as argued by Dr Maliki, there is a need to re-examine food security policies and approaches, painfully underscored by the recent global food crisis.

Such a review should include Singapore’s own food security policies and strategies. Singapore’s approach, in turn, should dovetail at least three fronts in the global action to tackle food security: ASEAN, through the AIFS as its immediate hinterland; the Asia Pacific Economic Cooperation (APEC) through measures to enhance food security around the Asia Pacific region; and thirdly, the G20 which aims to tackle the negative impacts of food price volatility on global food security, such as through international coordination.

Singapore’s role in Food Security

Significantly Singapore’s food security strategy has already undergone a rethink, as gleaned from Dr Maliki’s remarks at ICAFS 2011. To begin with, Singapore is repositioning itself along the food value chain. To promote international cooperation in addressing food security and lessen its high dependence on food imports, Singapore is moving from being a passive consumer of food to becoming a contributing player in the quest for a more stable global food system.

There are at least four prongs in this multi-faceted strategy, the first of which is through research and development. Singapore’s National Research Foundation recently awarded a US$8.2 million grant to a joint project to develop new rice strains that can adapt to climate change. This holds out potential benefits for the whole of Asia. .

The second strategy is to grow Singapore into a hub for agribusiness. This is being pursued by promoting the role of the private sector such as getting big players to set-up their operational headquarters and trading operations, as well as undertake upstream research in Singapore.

Urban Farming and Domestic Food Resilience

The third strategy is to turn Singapore’s own domestic market into a “test-lab” for urban agriculture by leveraging on its highly urbanised environment to find unique, urban solutions to food security. Agricultural production can be creatively brought within the urban population. The results of urban farming can eventually be shared and replicated in other Asian cities, Dr Maliki said. “Rooftop farming” and other urban farming ideas are being pursued with the aim of turning Singapore into a centre for urban farming.

A fourth, but no less important, strategy is the shift towards greater local production of three key food items – eggs, leafy vegetables and fish. A $20 million Food Fund is in place to incentivise farms to explore new farming technologies and build up capacity to ensure Singapore’s food supply resilience.

Singapore’s overall strategy is to seek win-win partnerships locally, regionally and globally as food security issues transcend national boundaries. By taking care of its own needs while being useful to the ASEAN region and world, Singapore is poised to play its part in tackling the global food security problem.

Yang Razali Kassim is a Senior Fellow with the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University and the school’s Centre for Non-Traditional Security (NTS) Studies.

Wednesday, August 24, 2011

Subject: RSIS Commentary 123/2011 US and the Middle East: PR fiasco looms for Obama by James M. Dorsey

RSIS presents the following commentary US and the Middle East: PR fiasco looms for Obama by James M. Dorsey. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg

No. 123/2011 dated 24 August 2011

US and the Middle East:
PR fiasco looms for Obama

By James M. Dorsey

Synopsis

President Obama faces a public relations disaster in the Arab and Muslim world next month with his expected rejection of recognition of Palestinian statehood by the United Nations General Assembly. Obama could do much to restore his country's image and reaffirm the US as a player despite its unpopular policies.

Commentary

COME SEPTEMBER the United States will face a major public relations disaster in its Middle East policy when the UN General Assembly (UNGA) votes on Palestinian statehood. President Obama has vowed to oppose UN recognition of a Palestinian state within the borders prior to the 1967 war when Israel captured and occupied the West Bank, East Jerusalem and Gaza.

Although the UNGA is certain to grant the recognition by an overwhelming majority, the US has pledged to veto UN Security Council endorsement of the resolution. That will go against US claims that it favours the creation of a Palestinian state alongside Israel with boundaries based on the pre-1967 borders.

Credibility Problem in US Mid-East Policy

While the US veto will prevent Palestine from becoming a member of the UN, it will give it a kind of legal status currently enjoyed by Taiwan and Kosovo whose memberships in the world body have been blocked by China and Russia respectively. Moreover, recognition by the UN Assembly will affirm the pre-1967 borders as the legal boundaries of Palestine that was implicit in failed Israeli-Palestinian peace negotiations.

While the UN declaration of a Palestinian state will be a triumph for its president Mahmoud Abbas, it will be a public relations failure for Obama in the Middle East and North Africa. It will reinforce the perception that Washington is beholden to Israel notwithstanding Obama’s outreach efforts towards the Arab and Muslim world.

Ironically, Palestine's newly acquired legal status could prove advantageous to Obama's efforts to nudge Abbas and Israeli Prime Minister Benjamin Netanyahu to return to the negotiating table. Obama failed earlier this year to persuade Netanyahu to explicitly acknowledge the pre-1967 borders as the basis for a settlement. While he stopped short of rejecting Obama’s position, Netanyahu sought instead to strike a deal with Abbas involving Palestinian recognition of the Jewish character of the State of Israel in exchange for his acknowledgement of the pre-1967 borders.

Since the Palestinians have already conceded recognition of Israel as a state, Netanyahu’s demand is unacceptable to Abbas because it would undermine the position of Palestinians with Israeli citizenship and the right to return for refugees who were forced to flee when Israel was established in 1948.

Communications failure

Obama needs a communications strategy to explain his administration’s position especially the dichotomy between its declared support for a Palestinian state and its rejection of the UN resolution, which threatens to reduce the diminished credibility of the US to tatters. Washington’s credibility problem in the Middle East and North Africa stems only partly from US policies, including its unqualified backing of Israel. It also stems from the US failure to back popular uprisings wholeheartedly, as well as its perceived military weakness exemplified by its inability to defeat the Taliban in Afghanistan or force out Libyan leader Colonel Gaddafi.

The image of the US as a fumbling superpower arises from the fact that it has failed at the one thing it counts among its strengths: displaying a degree of transparency and accountability that would allow it to dominate the information game, manage expectations and massage the facts when its policies do not always square with the high standards it sets for others. To achieve that, the Obama administration would have to rejig its efforts to win Muslim hearts and minds that it launched with the president’s widely acclaimed speech in Cairo in June 2009.

Such rejigging would have to involve a concerted effort to engage with Middle Eastern and North African media, consistently and persistently, to explain US policy as well as how US policy making works. US officials have yet to hold a briefing for Arab journalists on US attitudes towards the anti-government protests sweeping the region. US officials, including Secretary of State Hillary Rodham Clinton, appear regularly on US news channels but only rarely on Middle Eastern or North African media outlets.

The failure to engage with regional media is in stark contrast to the US media campaign in the wake of the September 11, 2001 attacks on New York and Washington when the US established media hubs in Dubai, Brussels and London staffed with fluent Arabic speakers. The administration was equally effective with its use of Twitter and YouTube to broadcast Obama’s Cairo speech.

Arab Public Opinion

Against the backdrop of the region’s struggle for greater political freedom, the US would benefit from engaging in an open and transparent debate of its policies instead of simply issuing declarative statements to regional media. US officials go to great lengths to explain the nuances of their policies to the US media. However Middle Eastern and North African journalists, the very communicators needed to create an understanding of US policy, are excluded from those briefings.

Engaging with regional journalists may not convince Arab public opinion of the moral justification of US policy, but would at least go a long way to dispel conspiracy theories and prejudices prevalent in Arab media. It would help shape understanding of and in-depth reporting on US policies and avert unpopular positions becoming destructive PR fiascos.

Moreover it would position the US as a power willing to engage rather than impose its views. The Arab world may well disagree with its policies but would have a more nuanced understanding of the reasoning that informs those policies.

James M. Dorsey is a Senior Fellow at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University. He is also the author of the blog, The Turbulent World of Middle East Soccer.

In September, the U.N. General Assembly will vote on whether to recognize Palestine as an independent and sovereign state with full rights in the United Nations. In many ways, this would appear to be a reasonable and logical step. Whatever the Palestinians once were, they are clearly a nation in the simplest and most important sense — namely, they think of themselves as a nation. Nations are created by historical circumstances, and those circumstances have given rise to a Palestinian nation. Under the principle of the United Nations and the theory of the right to national self-determination, which is the moral foundation of the modern theory of nationalism, a nation has a right to a state, and that state has a place in the family of nations. In this sense, the U.N. vote will be unexceptional.

However, when the United Nations votes on Palestinian statehood, it will intersect with other realities and other historical processes. First, it is one thing to declare a Palestinian state; it is quite another thing to create one. The Palestinians are deeply divided between two views of what the Palestinian nation ought to be, a division not easily overcome. Second, this vote will come at a time when two of Israel’s neighbors are coping with their own internal issues. Syria is in chaos, with an extended and significant resistance against the regime having emerged. Meanwhile, Egypt is struggling with internal tension over the fall of President Hosni Mubarak and the future of the military junta that replaced him. Add to this the U.S. withdrawal from Iraq and the potential rise of Iranian power, and the potential recognition of a Palestinian state — while perfectly logical in an abstract sense — becomes an event that can force a regional crisis in the midst of ongoing regional crises. It thus is a vote that could have significant consequences.

The Palestinian Divide

Let’s begin with the issue not of the right of a nation to have a state but of the nature of a Palestinian state under current circumstances. The Palestinians are split into two major factions. The first, Fatah, dominates the West Bank. Fatah derives its ideology from the older, secular Pan-Arab movement. Historically, Fatah saw the Palestinians as a state within the Arab nation. The second, Hamas, dominates Gaza. Unlike Fatah, it sees the Palestinians as forming part of a broader Islamist uprising, one in which Hamas is the dominant Islamist force of the Palestinian people.

The Pan-Arab rising is moribund. Where it once threatened the existence of Muslim states, like the Arab monarchies, it is now itself threatened. Mubarak, Syrian President Bashar al Assad and Libyan leader Moammar Gadhafi all represented the old Pan-Arab vision. A much better way to understand the “Arab Spring” is that it represented the decay of such regimes that were vibrant when they came to power in the late 1960s and early 1970s but have fallen into ideological meaninglessness. Fatah is part of this grouping, and while it still speaks for Palestinian nationalism as a secular movement, beyond that it is isolated from broader trends in the region. It is both at odds with rising religiosity and simultaneously mistrusted by the monarchies it tried to overthrow. Yet it controls the Palestinian proto-state, the Palestinian National Authority, and thus will be claiming a U.N. vote on Palestinian statehood. Hamas, on the other hand, is very much representative of current trends in the Islamic world and holds significant popular support, yet it is not clear that it holds a majority position in the Palestinian nation.

All nations have ideological divisions, but the Palestinians are divided over the fundamental question of the Palestinian nation’s identity. Fatah sees itself as part of a secular Arab world that is on the defensive. Hamas envisions the Palestinian nation as an Islamic state forming in the context of a region-wide Islamist rising. Neither is in a position to speak authoritatively for the Palestinian people, and the things that divide them cut to the heart of the nation. As important, each has a different view of its future relations with Israel. Fatah has accepted, in practice, the idea of Israel’s permanence as a state and the need of the Palestinians to accommodate themselves to the reality. Hamas has rejected it.

The U.N. decision raises the stakes in this debate within the Palestinian nation that could lead to intense conflict. As vicious as the battle between Hamas and Fatah has been, an uneasy truce has existed over recent years. Now, there could emerge an internationally legitimized state, and control of that state will matter more than ever before. Whoever controls the state defines what the Palestinians are, and it becomes increasingly difficult to suspend the argument for a temporary truce. Rather than settling anything, or putting Israel on the defensive, the vote will compel a Palestinian crisis.

Fatah has an advantage in any vote on Palestinian statehood: It enjoys far more international support than Hamas does. Europeans and Americans see it as friendly to their interests and less hostile to Israel. The Saudis and others may distrust Fatah from past conflicts, but in the end they fear radical Islamists and Iran and so require American support at a time when the Americans have tired of playing in what some Americans call the “sandbox.” However reluctantly, while aiding Hamas, the Saudis are more comfortable with Fatah. And of course, the embattled Arabist regimes, whatever tactical shifts there may have been, spring from the same soil as Fatah. While Fatah is the preferred Palestinian partner for many, Hamas can also use that reality to portray Fatah as colluding with Israel against the Palestinian people during a confrontation.

For its part, Hamas has the support of Islamists in the region, including Shiite Iranians, but that is an explosive mix to base a strategy on. Hamas must break its isolation if it is to counter the tired but real power of Fatah. Symbolic flotillas from Turkey are comforting, but Hamas needs an end to Egyptian hostility to Hamas more than anything.

Egypt’s Role and Fatah on the Defensive

Egypt is the power that geographically isolates Hamas through its treaty with Israel and with its still-functional blockade on Gaza. More than anyone, Hamas needs genuine regime change in Egypt. The new regime it needs is not a liberal democracy but one in which Islamist forces supportive of Hamas, namely the Muslim Brotherhood, come to power.

At the moment, that is not likely. Egypt’s military has retained a remarkable degree of control, its opposition groups are divided between secular and religious elements, and the religious elements are further divided among themselves — as well as penetrated by an Egyptian security apparatus that has made war on them for years. As it stands, Egypt is not likely to evolve in a direction favorable to Hamas. Therefore, Hamas needs to redefine the political situation in Egypt to convert a powerful enemy into a powerful friend.

Though it is not easy for a small movement to redefine a large nation, in this case, it could perhaps happen. There is a broad sense of unhappiness in Egypt over Egypt’s treaty with Israel, an issue that comes to the fore when Israel and the Palestinians are fighting. As in other Arab countries, passions surge in Egypt when the Palestinians are fighting the Israelis.

Under Mubarak, these passions were readily contained in Egypt. Now the Egyptian regime unquestionably is vulnerable, and pro-Palestinian feelings cut across most, if not all, opposition groups. It is a singular, unifying force that might suffice to break the military’s power, or at least to force the military to shift its Israeli policy.

Hamas in conflict with Israel as the United Nations votes for a Palestinian state also places Fatah on the political defensive among the Palestinians. Fatah cooperation with Israel while Gaza is at war would undermine Fatah, possibly pushing Fatah to align with Hamas. Having the U.N. vote take place while Gaza is at war, a vote possibly accompanied by General Assembly condemnation of Israel, could redefine the region.

Last week’s attack on the Eilat road should be understood in this context. Some are hypothesizing that new Islamist groups forming in the Sinai or Palestinian groups in Gaza operating outside Hamas’ control carried out the attack. But while such organizations might formally be separate from Hamas, I find it difficult to believe that Hamas, with an excellent intelligence service inside Gaza and among the Islamist groups in the Sinai, would not at least have known these groups’ broad intentions and would not have been in a position to stop them. Just as Fatah created Black September in the 1970s, a group that appeared separate from Fatah but was in fact covertly part of it, the strategy of creating new organizations to take the blame for conflicts is an old tactic both for the Palestinians and throughout the world.

Hamas’ ideal attack would offer it plausible deniability — allowing it to argue it did not even know an attack was imminent, much less carry it out — and trigger an Israeli attack on Gaza. Such a scenario casts Israel as the aggressor and Hamas as the victim, permitting Hamas to frame the war to maximum effect in Egypt and among the Palestinians, as well as in the wider Islamic world and in Europe.

Regional Implications and Israel’s Dilemma

The matter goes beyond Hamas. The Syrian regime is currently fighting for its life against its majority Sunni population. It has survived thus far, but it needs to redefine the conflict. The Iranians and Hezbollah are among those most concerned with the fall of the Syrian regime. Syria has been Iran’s one significant ally, one strategically positioned to enhance Iranian influence in the Levant. Its fall would be a strategic setback for Iran at a time when Tehran is looking to enhance its position with the U.S. withdrawal from Iraq. Iran, which sees the uprising as engineered by its enemies — the United States, Saudi Arabia and Turkey — understandably wants al Assad to survive.

Meanwhile, the fall of Syria would leave Hezbollah — which is highly dependent on the current Syrian regime and is in large part an extension of Syrian policy in Lebanon — wholly dependent on Iran. And Iran without its Syrian ally is very far away from Hezbollah. Like Tehran, Hezbollah thus also wants al Assad to survive. Hezbollah joining Hamas in a confrontation with Israel would take the focus off the al Assad regime and portray his opponents as undermining resistance to Israel. Joining a war with Israel also would make it easier for Hezbollah to weather the fall of al Assad should his opponents prevail. It would help Hezbollah create a moral foundation for itself independent of Syria. Hezbollah’s ability to force a draw with Israel in 2006 constituted a victory for the radical Islamist group that increased its credibility dramatically.

The 2006 military confrontation was also a victory for Damascus, as it showed the Islamic world that Syria was the only nation-state supporting effective resistance to Israel. It also showed Israel and the United States that Syria alone could control Hezbollah and that forcing Syria out of Lebanon was a strategic error on the part of Israel and the United States.

Faced with this dynamic, it will be difficult for Fatah to maintain its relationship with Israel. Indeed, Fatah could be forced to initiate an intifada, something it would greatly prefer to avoid, as this would undermine what economic development the West Bank has experienced.

Israel therefore conceivably could face conflict in Gaza, a conflict along the Lebanese border and a rising in the West Bank, something it clearly knows. In a rare move, Israel announced plans to call up reserves in September. Though preannouncements of such things are not common, Israel wants to signal resolution.

Israel has two strategies in the face of the potential storm. One is a devastating attack on Gaza followed by rotating forces to the north to deal with Hezbollah and intense suppression of an intifada. Dealing with Gaza fast and hard is the key if the intention is to abort the evolution I laid out. But the problem here is that the three-front scenario I laid out is simply a possibility; there is no certainty here. If Israel initiates conflict in Gaza and fails, it risks making a possibility into a certainty — and Israel has not had many stunning victories for several decades. It could also create a crisis for Egypt’s military rulers, not something the Israelis want.

Israel also simply could absorb the attacks from Hamas to make Israel appear the victim. But seeking sympathy is not likely to work given how Palestinians have managed to shape global opinion. Moreover, we would expect Hamas to repeat its attacks to the point that Israel no longer could decline combat.

War thus benefits Hamas (even if Hamas maintains plausible deniability by having others commit the attacks), a war Hezbollah has good reason to enter at such a stage and that Fatah does not want but could be forced into. Such a war could shift the Egyptian dynamic significantly to Hamas’ advantage, while Iran would certainly want al-Assad to be able to say to Syrians that a war with Israel is no time for a civil war in Syria. Israel would thus find itself fighting three battles simultaneously. The only way to do that is to be intensely aggressive, making moderation strategically difficult.

Israel responded modestly compared to the past after the Eilat incident, mounting only limited attacks on Gaza against mostly members of the Palestinian Resistance Committees, an umbrella group known to have links with Hamas. Nevertheless, Hamas has made clear that its de facto truce with Israel was no longer assured. The issue now is what Hamas is prepared to do and whether Hamas supporters, Saudi Arabia in particular, can force them to control anti-Israeli activities in the region. The Saudis want al Assad to fall, and they do not want a radical regime in Egypt. Above all, they do not want Iran’s hand strengthened. But it is never clear how much influence the Saudis or Egyptians have over Hamas. For Hamas, this is emerging as the perfect moment, and it is hard to believe that even the Saudis can restrain them. As for the Israelis, what will happen depends on what others decide — which is the fundamental strategic problem that Israel has.

About Me

ROLAND SAN JUAN was a researcher, management consultant, inventor, a part time radio broadcaster and a publishing director. He died last November 25, 2008 after suffering a stroke. His staff will continue his unfinished work to inform the world of the untold truths. Please read Erick San Juan's articles at: ericksanjuan.blogspot.com This blog is dedicated to the late Max Soliven, a FILIPINO PATRIOT.
DISCLAIMER - We do not own or claim any rights to the articles presented in this blog. They are for information and reference only for whatever it's worth. They are copyrighted to their rightful owners.
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